QuestionsProblem 3.15 5. 6. 7. Question 7 of7 Check My Work O Click here to read
ID: 2621123 • Letter: Q
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QuestionsProblem 3.15 5. 6. 7. Question 7 of7 Check My Work O Click here to read the eBook: The Income Statement Problem Walk-Through INCOME STATEMENT Edmonds Industries is forecasting the following income statement: Sales Operating costs excluding depreciation & amortization EBITDA Depreciation and amortization EBIT Interest EBT Taxes (40%) Net income $9,000,000 4,950,000 $4,050,000 1,260,000 $2,790,000 720,000 $2,070,000 828,000 $1,242,000 The CEO would like to see higher sales and a forecasted net income of $1,800,900. Assume that operating costs (excluding depreciation and amortization) are 55% of sales and that depreciation and amortization and interest expenses will increase by 8%. The tax rate, which is 40%, will remain the same. (Note that while the tax rate remains constant, the taxes paid will change.) What level of sales would generate $1,800,900 in net income? If necessary, round your answer to the nearest dollar at the end of the calculations.Explanation / Answer
Sales(100%)($5139900/0.45) $11,422,000 Operating costs excluding depreciation and amortization(0.55*Sales)(11422000*0.55) $6282100 EBITDA(45%)($3779100+$1360800) $5139900 Depreciation and amortization(1260000*1.08) $1360800 EBIT($3001500+$777600) $3779100 Less:interest(720000*1.08) $777600 EBT(100%)(1800900/0.6) $3001500 Taxes@40%($3001500*40%) $1200600 Net income(60%) 1800900
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